State Bank of India (SBI) looks to address its hefty wage and pension bill cost by improving productivity and laying more thrust on digitisation. 

The state-run bank’s wage cost in the next financial year will be around Rs 66,000 crore on an employee base of 235,000. The bank also has about 300,000 pensioners. 

“The problem (wage cost) can be solved through improving the productivity and that is something which we are trying to showcase. Our effort in terms of improving the productivity have already started yielding results,” SBI chairman Dinesh Khara said.

The country’s largest bank has generated almost Rs 95,000 crore worth of loan book through the digital route, which is up by almost 30%. About 59% of the savings bank accounts were opened through YONO, an integrated digital banking platform, in nine months of the current financial year ending December 2023.

“Going forward, we expect that this particular lever (digital) will start creating value,” said Khara. “The wage cost as well as pension obligations we should be in a position to meet by generating this incremental productivity through the digital route. And our attrition rate is just about 1% compared to the industry level which is much higher.” 

The outgo in the current financial year is higher at Rs 77,127 crore because of the provisions of Rs 18,127 crore for the wage revision and pension. Even as the negotiations were going on for a wage settlement, SBI was providing at the rate of 10% from November 2022 onwards, which was later increased to 14%. But as per the bipartite wage settlement, the hike agreed upon was higher at 17%. 

On the liquidity front, SBI has enough elbow room to grow. The credit-to-deposit ratio is at 66% as of 31 December 2023. 

With private banks getting strained on the loan-to-deposit (LDR) front, SBI sees opportunity in either buying portfolios from them or accelerating growth in that space.

“We have already got a pipeline which is almost Rs 4.6 trillion. So, that is one opportunity. But if at all opportunities come our way and it is in line with our risk appetite, we will be more than happy to support such kind of requirements of the corporates,” Khara told analysts.

Are private banks talking to SBI to sell their wholesale books? “As of now we have not received any such request. But if at all it comes, we will be more than happy to wrap it up if it meets our risk appetite, Khara said.

With the Reserve Bank of India (RBI) increasing risk weights, both for non-banking financial companies (NBFCs) as well as unsecured credit, the cost of capital has gone up while lending to this particular sector. Khara said SBI is passing on the cost to the NBFCs and the pricing has been jacked up.

SBI has recovered Rs 2,300 crore from written off accounts in the first nine months of this fiscal. These are small value recoveries which have come in.

“Recovery from advance under collection accounts (AUCA) has got its limitation. These accounts where the security, if at all is there, is much lower. Various such considerations are there when it comes to affecting recoveries in AUCA accounts,” said Khara.

No lumpy recoveries are expected to come in. “As far as lumpy recoveries are concerned, the biggest during this financial year is around Rs 200 crore,” Khara said.